Root Causing the Offshoring of Jobs

I had an “ah-ha!” moment last night. I was reading a book during the NBA Finals (no point really watching closely until the last three minutes) and it struck me:

Very often, I beat up on companies and CEO's for outsourcing and offshoring jobs. I realized that there have to be root causes deeper than I've been looking at. Shame on me, I thought, for not taking “5 Why's” thinking and applying it here. Why are companies outsourcing jobs? Keep asking “why” and you get closer to the root cause. I know that in manufacturing and healthcare settings, why don't I realize that in my own thought process? Again, shame on me. But, I'm learning.

The book that opened my eyes is Bringing the Jobs Home by economist Todd G. Buchholz. From the subtitle of the book, you can tell there is a political slant that might turn off some of you: “How the Left Creating the Outsourcing Crisis – and How We Can Fix It”.

The book is a quick read and I'm about halfway through it. But, it's early enough to share some thought starters here. It's only $6.99 on sale at Amazon if you want to read it for yourself.

His thesis is as follows (my paraphrasing):

American companies are only outsourcing and offshoring jobs to other countries because they think it is the right economic decision given current conditions and circumstances.

My “ah-ha moment” was that instead of solely blaming CEO's for being stupid, greedy, short-sighted or unpatriotic, it makes sense to explore the systemic causes that lead them to make these decisions. I say “solely blaming” because there are some CEO's that are, undoubtedly, making stupid decisions (not factoring in intellectual property or supply chain distance issues) or greedy and short-sighted decisions (making Wall Street happy). But, the “respect for people” notion of lean kicks in and I challenge myself to respect CEO's and assume most of them are making the right economic decision.

To fix the problem, you have to fix the root causes. You can't just tell people “don't offshore your jobs.” The root causes cited in the book are many. What I have read so far:

U.S. immigration policies put in place during the 1960's make it too difficult for smart, educated, entrepreneurial immigrants to come to the U.S. (policy usually favors older, less educated family members of those already here). This leads to reduced entrepreneurial opportunities as the current-day Andy Groves are more likely to stay in their home country instead of coming here to start businesses and to create jobs. Sidenote — the law did some positive things, such as reducing quotas that favored northern Europeans over people from other parts of the world. I agree we should not discriminate against people from certain parts of the world. But, I agree with Buchholz, that we should pick and choose the smartest and most talented from anywhere in the world, rather than prioritizing family members of those already here.

Work visa policies send educated workers home after three or six years, where they often create jobs and are natural partners for Americans to outsource work to in their home countries. Keeping educated people away or sending them home once they've worked here leads to job creation in other countries — people, jobs and countries that would have otherwise been here in the U.S.

Buchholz also finds fault with the U.S. education system and points out how the rest of the world has increased education while U.S. education standards have fallen. The author points out how before World War II that the U.S. gave its citizens (men and women) much more education than the rest of the world did. They caught up to us and our standards fell. Teachers unions are criticized, but Buchholz also points out how the smartest, most educated women mostly used to be “forced” into teaching, as other careers weren't open. Now that virtually all careers are open to women, schools can't possibly attract teachers that are as talented and as educated as they used to be. This is hurting our kids, he writes.

Upcoming chapters focus on taxes, regulation, and litigation as factors that more or less “force” companies to outsource and offshore jobs. Again, I disagree with taking all “blame” away from companies, but we have to talk about and debate root causes if we're going to fix things.

I'm not meaning to start a political argument here. But, my point is this… rather than moaning about job losses and corporate practices (myself included, obviously), let's spend that time fixing the root causes — improving education, lobbying our government to change their policies, etc.

I'll run a mini contest here — to help keep my inventory of books down. The person who leaves the most insightful or thoughtful comment on this post (by July 15) can have my copy of the book as a “hand me down” if you want it. If you want in on the contest, please email me in addition to posting a comment here.

Given the fact that there are limits set by Congress for the number of legal immigrants that can enter the U.S. each year, I agree with the argument that it shouldn’t just be “first come, first served.” As a country, it is in our best interest to choose those with skills, whether they are engineers or musicians or whatever, from Asia, Africa, or whereever.

Toyota embraces the reality that, “There can be no successful monozukuri (making thing) without hito-zukuri (making people). To keep coming up with revolutionary new production techniques, we need to develop unique ideas and knowledge by thinking about problems in terms of genchi genbutsu. This means it’s necessary to think about how we can develop people who can come up with these ideas.” This says nothing about limiting from where these folks hail.

In addition, my Masters cohort at Syracuse’s School for Information Studies included students from India, Japan and China. That diversity strengthened our capacity to acquire transferable learning. Way back in my elementary school civics classes, educators touted the “American Mosaic” as the source of our national strength. Cutting off the wellspring of immigration will dry us up as surely as the Colorado River no longer reaches the Baja California.

Right, Mark. I’m by no means arguing that we should limit immigration. We should encourage smart, hard-working, entreprenurial people to come here, regardless of where they are from. Most people think of immigrants as a drain on the system. Some are. But, if we can encourage immigrants who “give more than they get” then we all win. Immigrants like Andy Grove who help build great companies like Intel help this country immensely.

Canada makes immigration very easy, given you have skills to bring. They are competing very openly for the world’s brightest.

If Igor, or Subu or Chen in his/her country can do the same job equally well as Steve or Marsha, and it saves XYZ Inc. a lot of money, which ironically also makes Steve and Marsha’s retirement nest egg bigger, but they lose their jobs… hmmm. Sounds like outsourcing is (at the risk of oversimplification) the result of the economics of demand for cheaper and better good and services and the abilities of other economies to supply it.